Struggling with this decision. I am tossing up whether to max my HSA at ~$8,300/yr or continue to max out the Roth IRAs at ~$14,000/yr. We have maxed out our Roths every year for the past 10 years. The pivot to an HSA instead was mostly to pull back the amount we were spending and free up the $5,700 for spending/fun and take the foot off the gas so to speak.

Can't max both, getting the 401k match and then maxing our roth is 12.3% of our income (employer puts 10% into 401k on top of that) so we are contributing 22.3% of gross income every year. Shifting from Roth to HSA would reduce our % contribution from 12.3% to 9.3% which seems quite low

Single income, can't contribute much more than what we are already doing

Gotchya.

It seems like yall are contributing to IRAs for both you and your wife, correct - to get to $14k? Couldn't you max out your HSA and then max out either yours or hers IRA (or contribute some percentage that equals to maxing out one IRA).

I think you're doing great.

I agree with the above poster to max HSA first and then start on the Roth IRA with whatever is left over up to whatever point you are comfortable with.

The other benefit to an HSA is that after 65, you can take penalty-free taxable withdrawals for non-medical expenses, essentially acting like a traditional IRA/401k. Assuming you'll invest your HSA balance, there's a lot upside to all of the flexibility and tax benefits of the HSA.

I'd max out the HSA because of the tax benefits. You don't have to max out the Roth, so maybe consider doing a partial contribution to keep your % somewhere between 9 and 12?

Thanks all for the input.

Roth IRA's first. After that if you cant afford to max out the HSA just do what you can.

HSA if used properly basically serves as another tax deferred retirement account with the option for tax free distributions for medical expenses.

I wouldn't get too bent out of shape about not getting the deduction today. Every retiree I work with wishes they had more Roth dollars.

txaggie_08 said:

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HSA also reduces FICA taxes, whereas IRA/401k does not.

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This...

assuming you are under the FICA tax cap, HSA is by and large the most broken savings vehicle. The order of operations for people under the FICA cap is 401k up to the employer match, then HSA. After you max both those the choice between Roth IRA, Roth 401k or pre-tax 401k becomes a bit more complicated but the first two steps are simple (assuming you are under the FICA tax cap)

permabull said:

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txaggie_08 said:

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HSA also reduces FICA taxes, whereas IRA/401k does not.

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This...

assuming you are under the FICA tax cap, HSA is by and large the most broken savings vehicle. The order of operations for people under the FICA cap is 401k up to the employer match, then HSA. After you max both those the choice between Roth IRA, Roth 401k or pre-tax 401k becomes a bit more complicated but the first two steps are simple (assuming you are under the FICA tax cap)

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Maybe so if you're trying to do everything by the book for the remainder of your life. Someone also has to turn around and invest the tax savings every year that are received by doing HSA over Roth. If they aren't disciplined to enough to do that then the math doesn't work.

If someone takes their $2k of tax savings and dumps it into their checking account or goes on a cruise then you may as well have just done the Roth

I agree in principal but the tax savings are seen in your paycheck, so if you say "I need $7k a month in my paycheck so I can put X to my HSA and hit that" then you will automatically be hitting that value. If you need 7k a month and put whatever is left over into a Roth, the number would be less than X since it paid income and FICA taxes.

Even if you are healthy as a clam in retirement you will have HSA eligible expenses down the line. Medicare Part A is free but part B and D are not and those premiums are taken out of your social security check. You can reimburse yourself tax free for the premiums you pay for Medicare part B and D.

Roth IRA's weren't a thing until 1998.

I love HSA's and think they're a great tool. I'm just of the opinion that a Roth IRA should be prioritized first. Tax free growth and tax free distributions without restriction is very powerful. Get as much into Roth accounts as you can and thank yourself later.

Baby Billy said:

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Roth IRA's weren't a thing until 1998.

I love HSA's and think they're a great tool. I'm just of the opinion that a Roth IRA should be prioritized first. Tax free growth and tax free distributions without restriction is very powerful. Get as much into Roth accounts as you can and thank yourself later.

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Good to know re: 1998. What about Roth in 401k?

Chipotlemonger said:

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Baby Billy said:

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Roth IRA's weren't a thing until 1998.

I love HSA's and think they're a great tool. I'm just of the opinion that a Roth IRA should be prioritized first. Tax free growth and tax free distributions without restriction is very powerful. Get as much into Roth accounts as you can and thank yourself later.

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Good to know re: 1998. What about Roth in 401k?

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Much later. Maybe 2005-2010. That's just when they were introduced. Most employers offer it now but didn't 10 years ago.

I fat-fingered my math, we are at 16% of gross in contributions with the 401k free match and a max Roth IRA. Single income, can't do a whole lot more than that. Our savings rate outside of retirement is healthy also, just don't want to tie everything up into tax-deferred vehicles.

Brian Earl Spilner said:

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HSA are triple-tax advantaged. It should be prioritized over Roth, however the best answer is to max both. I would look at lowering expenses to make that possible.

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quadruple tax advantage if you contribute from payroll and avoid fica tax

Didn't realize 401k catch up started at 50. I'm there this year. If my birthday is in September can I do the full $7500 this year?

max the HSA then invest however much you can in Roth, then put your emergency fund in Roth in VMFXX or whatever money market to earn ~5% tax free, then incase of emergency can withdraw the contributions penalty-free, but ideally won't be needed and you've taken advantage of 2024 contribution limit while still able to

wcb said:

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Didn't realize 401k catch up started at 50. I'm there this year. If my birthday is in September can I do the full $7500 this year?

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Yes, you can begin making catch up contributions during the calendar year you will turn 50.

shovel pass said:

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wcb said:

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Didn't realize 401k catch up started at 50. I'm there this year. If my birthday is in September can I do the full $7500 this year?

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Yes, you can begin making catch up contributions during the calendar year you will turn 50.

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And make sure you set the catch up contribution correctly with your 401k plan administrator as for mine I had to do a separate catch up percentage to get the extra $7,500 in 2023. That is likely SOP but caught me off guard. You don't just bump your regular percentage up you have been doing prior to the year you turn 50.

Brian Earl Spilner said:

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HSA are triple-tax advantaged. It should be prioritized over Roth, however the best answer is to max both. I would look at lowering expenses to make that possible.

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Actually did the math and after the first paycheck of the year and the increase in the standard deduction it's not too big of a difference to swing maxing out both the Roth and the HSA so that's what we are doing.

Brian Earl Spilner said:

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HSA are triple-tax advantaged. It should be prioritized over Roth, however the best answer is to max both. I would look at lowering expenses to make that possible.

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Sometimes I'm pretty smart...but for some reason HSAs confuse me.

How are HSAs triple advantaged?
1. Tax free going in
2. Tax free coming out for medical
3. Profit?



I have an HSA through work, family plan, I've just been putting in a couple hundred bucks a month. Looks like I should have been putting in $8000/year...that'll change soon.

My wife will start an HSA this coming September. Can she put in $8300 to hers and I also put in $8300 to mine? Or is it $8300 total between the 2?

El Chupacabra said:

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Brian Earl Spilner said:

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HSA are triple-tax advantaged. It should be prioritized over Roth, however the best answer is to max both. I would look at lowering expenses to make that possible.

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Sometimes I'm pretty smart...but for some reason HSAs confuse me.

How are HSAs triple advantaged?
1. Tax free going in
2. Tax free coming out for medical
3. Profit?



I have an HSA through work, family plan, I've just been putting in a couple hundred bucks a month. Looks like I should have been putting in $8000/year...that'll change soon.

My wife will start an HSA this coming September. Can she put in $8300 to hers and I also put in $8300 to mine? Or is it $8300 total between the 2?

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Any investment growth within the HSA is also tax free.

max HSA and as much of Roth as possible, then for all medical expenses throughout the year reimburse through HSA but put those funds directly into Roth

that way your medical expenses are paid with untaxed income, and those funds keep their tax free growth advantage

but once Roth is maxed stop reimbursing to let the HSA grow tax free

interesting reading

You can't double up. That's the family limit of 8300

desperately wish I was still eligible to contribute to HSA (employer only offers top tier PPO with zero premium, wasted on me with no health issues)
so much that in April/May YOLO'd half my previous HSA into tech/semi's/AI and gained about 2 years worth of contributions since